Getting the best people into the most important roles does not happen by chance; it requires a disciplined look at where the organization really creates value and how top talent contributes, says the McKinsey Quarterly, by Mike Barriere, Miriam Owens and Sarah Pobereskin.
To understand how difficult it is for senior leaders to link their companies’ business and talent priorities, consider the blind spot of a CEO when asked to identify the critical roles in his company, the CEO neglected to mention the account manager for a key customer, in part because the position was not prominent in any organization chart.
By just about any other criterion, though, this was one of the most important roles in the company, says the report, critical to current performance and future growth. The role demanded a high degree of responsibility, a complex set of interpersonal and technical skills, and an ability to respond deftly to the client’s rapidly changing needs.
Disconnects such as this between talent and value are risky business—and regrettably common, says the report. Gaining a true understanding of who your top talent is and what your most critical roles are is a challenging task. Executives often use hierarchy, relationships, or intuition to make these determinations.
Companies can more closely connect their talent, and their opportunities to create value, by using quantifiable measures to investigate their organizations’ nooks and crannies to find the most critical roles, whether they lie in design,manufacturing, HR, procurement, or any other discipline. The leaders at such companies understand that reallocating talent to the highest-value initiatives is as important as reallocating capital.
Those results are consistent with the experience of Sandy Ogg, founder of CEOworks, former chief HR officer (CHRO) at Unilever, and former operating partner at the Blackstone Group. While in the latter role, Ogg began paying attention to which Blackstone investments made moves to match the right talent to the important roles from the start. He observed that 80% of those talent-centric portfolio companies hit all their first-year targets and went on to achieve 2.5 times the return on initial investment.
The first step in linking talent to value, says the report, is to get under the hood of a company’s ambitions and targets. It is not enough just to know the overall numbers—the aspiration should be clearly attributable to specific territories, product areas, and business units.
Company X already understood its overriding goal: to grow revenue by 150% within the next five years in its highly disrupted industry, says the report. Design and manufacturing innovation would clearly have a positive impact on all business units, but if the two largest ones were to grow, they would also have to take advantage of international opportunities and digitally deliver their products and services.
Disaggregating value set the table for a strategic discussion about which roles mattered most and about the skills and attributes needed by the talent who would fill those roles and drive future growth, explains the report. it was clear that the company’s future leaders would need to be comfortable in an international environment, leading teams with a high degree of cultural diversity; have experience in cutting-edge design and manufacturing processes; and possess digital fluency. The leaders would have to be flexible and comfortable adapting to unforeseen disruptions.
Identifying and quantifying the value of the most important roles in an organization is a central step in matching talent to value. These critical roles generally fall into two categories: value creators and enablers. Value creators directly generate revenue, lower operating costs, and increase capital efficiency. Value enablers, such as leaders of support functions like cybersecurity or risk management, perform indispensable work that enables the creators. These roles are often in counterintuitive places within the organization. Typically, companies that consciously set out to pinpoint them find about 60% are two layers below the CEO, and 30% are three layers or more below the CEO.
The ability to achieve true role clarity is closely tied to overall organizational performance and health, according to McKinsey research. The initial goal is assessment of where the greatest potential value is and what skills will be necessary to realize that value, not identification of the top performers. This approach allows leaders to think more strategically about matching talent and value rather than merely focusing on an individual’s capabilities.
Role identification and clarification is a process that works with any kind of organizational structure, including those based on agile principles, describes the full report In fact, the potential rewards of value-based role clarity might even be greater in agile organizations, because flatter organizations build themselves around the principle that empowered talent in the right roles is the key to unlocking value. Pinpointing where a critical role sits in an organization chart is not important. What matters is knowing the potential outcomes of any given role, anywhere in the organization.
The complete report describes Role Identification and Clarification, defining their value agenda; now they needed to map, in collaboration with their HR teams, the most critical roles. In each unit, leaders addressed the following series of questions:
Dig deeper into these needed values, roles, disruptions and strategies by reading the complete reportmaterial here…