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Talent Era, The: Achieving a High Return on Talent

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Talent Era, The: Achieving a High Return on Talent


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  • Copyright 2002
  • Edition: 1st
  • Book
  • ISBN-10: 0-13-041040-3
  • ISBN-13: 978-0-13-041040-5

Talent rules! Talent is a company's most important asset. This book shows why talent must be managed to generate maximum profits for the organization. The Talent Era presents a complete strategy for leveraging talent to maximize business value. Author Subir Chowdhury helps you discover how to measure talent and explains why there's more to attracting talent than raising salaries. He also discusses how managers handle talented subordinates, how to measure the value of talent, and much more.

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The Talent Value Chain: Achieving a High Return on Talent

Table of Contents

Introduction: Welcome to the Talent Era.

Not Just Sports and Entertainment Anymore. The Effects of Free Agency. The Impact of Unions. The End Game. What Do We Mean by “Talents”? Why This Book?

1. The Talent Value Chain.

Talent Breeds Innovation. Five Links in the Idea-Talent Chain. Five Ways to Create Value. The IDEA Value Cycle.

2. Winning the Creative War.

Talent and Environment. Winning by Leveraging Talent. Talent to Meet the Competition. Talent Is Key in Mergers. Continuous Development Cycle. On-Time Obsolescence.

3. Talent: Engine of the New Economy.

Talent Creates. Talented Leaders Win. Seven Differences between Talents and Knowledge Workers. How Can Knowledge Workers Become Talents? People Quality Management (PQM). The Power of Mind: Positive Thinking.

4. The Elements of a Talent-Friendly Organization.

Talent Satisfaction Measurement System. Organizational Management System. Talent As Customer, Talent As Supplier. Compensation. Summary.

5. Talent Management System.

Four Elements of the TMS. Benefits of the TMS. Attracting Talents. Keeping Talents. Managing Talents. Identifying Talents. The Challenges of TMS. Summary.

6. The Growth Rule.

Positive Challenge. Grass-Roots Education. Cross-Functional Capability. Support for Change. Seven Laws of Fusion of Talents. Launching an Idea Bank.

7. Talent Development Budget.

Value-Driven Cost Structure. Contingency Plan for Talents. The Power of Developing Talent. Summary.

8. Return on Talent.

Knowledge Generated and Applied. Investment in Talent. ROT Measurement. Three Examples of Calculating ROT. Optimize ROT.

9. The Seven Secrets of Talent.

1. Search for the Dream. 2. Evaluate Your Strengths and Weaknesses. 3. Cultivate Discipline and Determination. 4. Render Ideas and Actions Inseparable. 5. Embrace Positivity. 6. Take a Never-Give-Up Attitude. 7. Show a “Next” Mentality.

Example of the Talent SECRETS: Michael Jordan.
Bibliography.Acknowledgments.Index.About the Author.


Introduction: Welcome to the Talent Era

It was late 1969, and the Amazing Mets had just won the World Series. The United States was in a turbulent time. The civil rights movement, the assassinations of Martin Luther King and Robert Kennedy, and the moon landing dominated the headlines. Riots had erupted across the country; music, theater, movies, and TV shows explored uncensored territory; and, yes, the Mets had won. The world had turned upside-down. But of all those events in the late sixties, the one that might seem inconsequential had one of the biggest impacts in the long term. You see, it was the Mets rather than the Cardinals who won the National League championship.

Throughout the 1960s, the Cardinals had been a powerhouse. In 1969, the Cardinals had won three of the previous five years and were expected to win again. They had Bob Gibson, Lou Brock, and several other fine players. But the Cardinals had been ruled with an iron fist, and one outstanding player voiced a complaint that had been brewing for years. Curt Flood was one of the greats: He was a three-time all-star, played a record 226 games without an error, was awarded seven Gold Gloves, and was a lifetime .293 hitter in an era when pitchers dominated. With Flood, the Cards had won three National League pennants and two World Series. It was his eleventh year in the league in 1969. Whereas Flood was making $90,000 at the time, many players were making less than $10,000. Under baseball's reserve clause—which had been in effect in one form or another since the game began—a team owned a player. If a player would not sign an agreement with his team, he had the option of quitting baseball, but he could not play for another team. Players were traded from team to team, sometimes against their wishes. This was the way it was, and, although many had grumbled about it, no one had tried to buck the system. But after losing the pennant in 1969, the Cards, who viewed Flood as a troublemaker despite his obvious skills, decided to trade him to the Phillies. Flood refused to go and on January 16, 1970, filed a lawsuit claiming that the reserve clause violated the antitrust act and should be eliminated. In the end, Flood lost the suit. He sat out the 1970 season and was traded to the Washington Senators in 1971. After thirteen games, he decided the atmosphere was too difficult and retired from the game. But the damage had been done—Flood's suit had broken the dam. In 1975 it was official: Andy Messersmith and Dave McNally won their case against the reserve clause, and free agency was born.

In 1976, the average baseball player received eight times what the average person received in compensation. By 1994, baseball salaries had reached fifty times the average salary. Free agency had changed the game, other sports, and everyone's perception of what a worker was worth. No longer were wages a suppressed topic that management dictated. Curt Flood cut his career short based on his conviction that he was in effect a slave to baseball and that he should be free to go out and seek whatever employment he could. He had seen the impact of free agency not only on the game of baseball, but also in every walk of life.

But Flood had opened up the gates. His action opened a new era—an era when people evaluate their own talent and expect to get what they are worth. At first, it was confined to sports. Basketball players quickly figured out that there are only five guys out there generating a lot of revenue, and so they ought to be paid for it. Football followed suit. Soon each top tennis player, each top golfer, each top player in any sport is a very visible Talent (in this book we will capitalize the word Talent when referring to a person with talent).

It should be pointed out that in the entertainment business, Talents have always been paid much more than others in their craft. It used to be that the studios ruled and had their actors under contract, much as did Major League Baseball. But there was generally the possibility that another studio would pick up the renegade actor. It was Cary Grant who actually bucked the studio system, but the repercussions of his actions were confined to the entertainment industry and did not affect the world at large.

Not Just Sports and Entertainment Anymore

Just as athletes and entertainers had felt the effects of free agency early, in the 1990s talented workers in many other fields began to understand their real worth to their organizations. Management may have known it all along: All workers are free agents. Companies tried for years to foster the feeling that people were there to work for life, and they would be paid whatever management felt like giving them—and they would have to take it. It was as if a self-imposed reserve clause existed. Management tried to build loyalty by dispensing more incentives, but this system began to break down as more people started to see themselves as Talent, as free agents who should receive more if they produced more.

Ironically, corporations often foolishly broke the bond of trust through massive layoffs and an indifferent attitude toward their employees. Even IBM, which typified the "you are here for life" attitude, was among the first in the "lay off people to boost your stock price" movement of the 1980s. This seemingly callous attitude toward employees was headline news, but it happened so regularly that by the 1990s, work for many people had become a place to go simply to make money—it was no longer a home away from home. Loyalty was a zero-sum game. It was not unusual to see people moving every year to a new job, enabled by the Internet and other information technologies. With the growth in the economy, new ventures opened up every day. It was a time to keep your eyes open for new opportunity.

When the big Internet blitz hit, getting into the game early often meant millions of dollars. Getting the best Talent to generate the best ideas and products meant future market domination. Suddenly, all in-demand workers were like free agents. The stories of Steve Ballmers of Microsoft driving up to the front door of Borland with million-dollar signing bonus checks for Borland's key Talents—and then driving away with them—may or may not be true, but many of these people now work for Microsoft. The so-called "Talent war" was on.

Although the "war" may have ended, today we are still in the midst of the Talent Era. People are more aware than ever of their value to their company. So, management must now identify its key Talents, attract more Talents, grow Talents, manage and motivate Talents, and keep Talents. Success depends on these Talent management skills.

This book will teach you all you need to know if you are a Talent, if you manage Talent, or if you hope to optimize the Talent in your organization. This era is defined by a basic change in relationship between employees and companies. Most employees today have lost their dedication to their company. In the face of increased layoffs and the fact that employees will change jobs if another "situation" looks better, any company that wants to be successful needs to adapt, to anticipate losing Talent, to foster more Talent, to try to keep the Talent it has, and to make sure this Talent is utilized to the fullest. Those less-talented employees, including many knowledge workers, may still be vital to keep the company going, but they need to be compensated differently.

That is a key tenet of this book—that top Talents should be compensated commensurate with their contributions and that companies must adapt to this framework to succeed. Because Talent can be found at any level, if you are paying everyone what you pay to keep Talent, you will quickly find yourself in an untenable position. Likewise, if you are a talented person, you want to work for a company that will recognize your ability and not tell you that everyone at your level gets treated the same—even if you are doing the work of three people or have just developed the product that will save the company.

In the Talent Era, the "flood gates" are open. Just as most athletes and entertainers would not want to go back to the old days, most talented business employees would not want to go back to lifetime employment contracts. Companies can do a lot more to keep Talent, but after the ideals of self-determination, capitalism, and freedom to choose are embraced by people, companies must adapt to the situation at hand. Tough decisions need to be made. Talent-friendly policies and practices may be the difference between success and failure. The Talent Era clearly won't end anytime soon. And so, every manager needs to understand the implications.

The Effects of Free Agency

Team owners know that people go to games to watch the marquee players. Look at the interest that was generated in baseball by the Mark McGwire-Sammy Sosa home run race and again with Barry Bonds. Even more intense is the attention garnered by Tiger Woods in golf. Tiger has put excitement back into golf. Throughout the history of sports, there have always been high-impact players, the all-stars. The same is true in entertainment. Big names bring in big bucks. Stars sell movies. Bigtime directors and producers like Steven Spielberg or George Lucas put people into the seats. Big-draw names can mean tens of millions in revenue for a single movie. In some sports and most entertainment, however, if you are not a marquee Talent, you may be a poor, starving artist.

But in baseball, even the worst players make exceptional money—and that is where management made its mistake. The owners' initial reaction to free agency was predictable: They went out and bid up the cost of the good players, and thus their payrolls shot up. The money spent for the best players became a draw in and of itself. The owners with the most money tended to win the most games. But to make up for their monetary losses, the owners increased ticket prices, boosted advertising and promotions in the ballparks, licensed souvenirs with their logos, and negotiated more lucrative TV contracts.

If baseball owners had paid their stars commensurate with their contributions and left it at that, then we might say that these were smart business decisions needed to compete and fill stadium seats. But, baseball owners failed to understand the difference between Talent and knowledge workers, between stars and utility players. People go to the game, read the paper, watch the news, view sports shows, and listen to radio shows to keep up with the players who win games through their ability. They are worth more money. The difference between a star and an average player is substantial. Average players can be easily replaced. Where owners make their mistake—in sports and in business—is when they start paying average players substantially more. The median baseball salary is now over $1 million. Eventually, this "salary creep" spreads to players who could be replaced by any of dozens of minor leaguers who are getting paid substantially less.

Minimum salary levels have skyrocketed since free agency began. The impact has been highly inflationary. Owners could contract most players for much less, but they seem not to understand: Treat your stars differently. Why should a fifth-place team be paying a mediocre pitcher $5 million to lose fifteen games? Obviously, you try to do your best, but the return on your investment needs to be there.

The Impact of Unions

The labor unions in baseball gained great power with the advent of free agency. The threat and the actuation of strikes had a major impact on the agreements between owners and players. Indeed, the union is a major reason for the high minimum salary now afforded to baseball's weakest players. So far, baseball owners have afforded the costs, in part by raising prices and taking smaller profits. They have bowed to union demands. Other sports unions, especially in basketball and football, have had similar success, based largely on the visibility of the Talent.

But unions have had little impact on the highest salaries paid to the stars. In fact, in most sports, unions have somewhat suppressed the money available to stars in favor of utility players. The unions' work is largely based on raising minimums—and getting the stars to go along.

So, we might suppose that unionization might be the best approach for workers in general and perhaps even for Talent. Unions have historically fought for minimum wage levels, treating employees at certain levels equally, and demanding benefits. If a corporation is unionized, it may be hesitant to offer employees new

incentives, fearing that they may become permanent and more widespread. Certainly, offering employees at a given level more than other employees at that level is likely to signal to a union that the corporation is in a position to pay more for those employees. A corporation may become reluctant to offer new programs to keep Talents, especially if it is in a competitive market where increases in costs might jeopardize the corporation. By mandating pay scales and quotas, unions may hamper management's ability to treat Talent differently. In fact, unionization generally forces companies not to respond to the needs of Talent, and so the best Talents leave. Over time, this breeds mediocrity and failure. With no one putting pressure on salaries, everyone remains on the low end, and the corporation remains flat and uncompetitive.

In essence, where unions succeeded in baseball, they could fail in a competitive marketplace. The unions took advantage of the Talents' increase in salaries to drive up the salaries of the utility players in baseball. The lesson to the unions here is to allow the Talents to get the increases and hope that those increases will drive the salary levels of all workers. If unions push for the best people to get paid better and argue that their workers should be compensated in line with any other worker, as has happened in sports, they may get the best of both worlds. This seems unlikely to happen, and so unionization may stifle the upward salary movement that is being generated in the Talent Era.

The End Game

Indeed, in 2001, the strong demand for Talent over the past three years resulted in major wage increases. The pressure on salaries for Talent is driving salaries up for everyone. Clearly, corporations are feeling the pressure from the Talent and are reacting as many owners of sports teams have—by paying more for everyone.

If business owners let themselves or unions dictate universal salary structures, then corporations, in defending key Talent, will be forced to boost the salary structures for everyone. This is what happened in professional sports, and it is happening in almost every corporation worldwide. The effect is that much of the workforce is becoming overpaid. In economic downturns, this portends massive layoffs. In turn, a company then does not have the knowledge workers it needs and is hampered by insufficient staffing. Every corporation should want its employees to be compensated properly in relation to their return on investment. If Talent is not compensated differently, the inflationary model will grip the company, resulting in seasonal layoffs, lower profits, failures, or higher prices.

Recent articles have exposed the enormous sums of money compensating the heads of the major companies. Disney's calamities with payment to their chief executives and enormous parachutes also bring on an array of questions about what is just compensation. In baseball, the $25 million per year being paid to Alex Rodriguez has come under close scrutiny, especially in light of the collapse of the Texas Rangers who pay it. Most headlines are grabbed at the CEO level, and most compensation is going to that level, whether the CEO is a Talent or not. Under what circumstances is agreeing to a golden parachute an intelligent business decision?

Clearly, most people are not paid what they contribute to a corporation. Corporations have costs other than salaries, benefits, and travel expenses. Overhead, profits, plant, and many other costs associated with a corporation factor in. Some corporations derive their revenues and most of their activities from people, for example, a consulting company. Others are so highly automated that they need very few employees to generate large sales volumes. Clearly, most companies fall somewhere in between. Most have little idea what most of their employees contribute. Hiring decisions are made based on need and the grade level of the employee needed. The actual contribution of the employee is unknown but is expected to be above some minimum guidelines. For instance, the new employee might be required to generate sales in excess of ten times salary. Managers often hear employees complain that they should receive what they deliver to the company. They are partly right. They should receive compensation in line with the company's return on investment in them. I call that "return on Talent," and I dedicate a full chapter in this book to defining return on Talent and how to measure it. Practically speaking, it would be impossible to measure every employee's return on Talent. You need to choose wisely those people whom you believe to be talented and evaluate their impact to make sure they are being compensated properly.

What Do We Mean by "Talents"?

Talents are the relatively few people who contribute the most to the organization who need to be recognized, nurtured, and leveraged to maximize the positive results only they can achieve. They are different. They are the stars, and they need to be treated like stars. They contribute more and need to be compensated more than the knowledge workers. The notions of giving "pay for performance" and identifying exceptional contributors as "high-potential" employees (hi-pos) are not new. Indeed, they are common practice. Many corporations have been trying to manage the challenges of identifying the strongest contributors and treating them differently without creating excessive discontent in the rest of the workforce.

Corporations need to learn to deal with free agency without going broke by treating employees as customers. After all, as a hiring manager, you are trying to get Talent to buy what you are offering and then to develop loyalty with ongoing customer care to retain Talent. And just as corporations are increasingly segmenting high-valued customers for special attention, perhaps it is time to segment high-valued employees (customers) for special treatment.

Compensation should not be assumed as the primary factor in attracting and retaining Talent. Money is a big factor for some, but not for others. Talents have visions, purposes, and values. Coworkers, bosses, daily work environment, and opportunity to make big differences and to win at the game of business attract Talents as much or more than does money. Fair compensation is certainly a maintenance factor. Inadequate compensation is a disincentive. Excessive compensation does not guarantee happiness of Talent. The joy of work is a central factor in the productivity and satisfaction of Talents, and indeed of all workers from top to bottom in any organization.

Why This Book?

This book will:

  • Help you see why you must treat Talent differently from most knowledge workers
  • Tell how to measure return on Talent (ROT)
  • Show how to maximize yourself and others as Talent
  • Provide key elements of a Talent-friendly organization
  • Suggest what is needed to attract, hire, keep, and best utilize Talent
  • Tell how to leverage the Talent on your team
  • Reveal the seven secrets of Talent


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