We use the term ‘talent’ a lot in HR and recruiting but what is talent really and how important is it to our organizations?
The History of Talent
The word talent is of Latin origin meaning to scale, balance and sum. In Greek and Roman times, it was one of several ancient units of mass and was a commercial weight. The weight of talent and its value were equivalent to a naturally occurring precious metal including gold and silver. Gold doesn’t corrode and is a universal symbol of immortality and power. Gold and silver’s rarity was used to obtain power and demonstrate the owner’s position within the larger ecosystem or culture.
If the concept of talent has its roots in measurement, power and success, then why is evaluating and measuring talent a concept business leaders struggle with? Is it simply just the idea of having the most talent that lends to creating and growing a successful company? Unfortunately, talent isn’t as simple that. There are complexities among the layers and levels of our gold, shiny talent. It isn’t just about exerting or demonstrating power. It’s about performance and the impact employees or are talent contribute individually and collectively for our organizations. It starts first with assessment and measurement.
How Important Is Talent?
Your CEO knows talent is important. According to a 2016 study by PwC, CEOs are well aware of the extraordinary challenges with the skills shortage and knowledge worker gap ahead but seem less certain about how to tackle the problem. That is exactly where we fit in. Ninety-three percent of CEOs say that they recognize the need to make a change when it comes to measuring, evaluating, cultivate or growing talent but 61% of CEOs haven’t yet taken the first step. This inability to make a move is in happening because of analysis paralysis. The issue of talent is so important. It is something we haven’t been able to effectively evaluate or measure so we do nothing. We are hiding behind fear of our talent. We frozen and unable to lead with our talent because we are stuck analyzing, discussing and determining how it is best defined and evaluated.
The history behind talent and our inability to effectively measure or assess talent is irony at its finest. It’s even more ironic in our failure to act on talent. We are frozen. We are waiting and we are losing the talent we can’t measure.
These my friend, are the reason(s) we are in the business of recruitment or what some call talent acquisition. We are the subject matter experts on all things talent in our organizations, but we aren’t business experts in the broad sense. The truth is there is no way to effectively define and measure talent because there is simply no line on our financial statements called, “Talent Impact Ratio” or “Talent Equity.” We are asking for a black and white concepts in the gray world of business. It’s the fifty shades of talent if you will.
How to Measure Talent
Recruiting and HR Metrics like turnover, retention, and cost per hire are metrics and analytics that only look at the initial impact of talent in terms of the cost associated with the best talent that joins our organization. Unless you are an individual contributor in an revenue generating role, the impact of talent is hard to define and measure. Metrics like revenue per employee are more effectively at measuring the impact of great talent at your organization, but don’t tell us the impact of an amazing individual who works with operations. The path to their reach and impact is murky at best and so the journey to effectively defining, evaluating and measuring talent continues.
Books like Dave Ulrich’s Leadership Capital Index which I am about halfway through at present are helping to change how we evaluate talent and the impact of leadership. It’s not an easy read, but I have to remind myself that neither are financial statements or P&Ls. Understanding business is hard and so far my biggest criticism of Ulrich’s book is that it is only evaluating the benefit of leaders within the organization. His Leadership Capital Index doesn’t go deep enough to measure the impact of talent within the entire organization. I like that it is speaking a CEO’s language, but it doesn’t look at the impact of front line managers and what Seth Godin refers to as linchpins within the organization. These are employees who disrupt, transform and impact the business in such a way they are indispensable. Unfortunately, at present, we have no real way to effectively measure the impact of those linchpins. Maybe I’m too early in my assessment of Ulrich’s book since I’m only halfway through. I’ll keep working through it in small doses, but I like the direction Ulrich is headed. I just wish it was an easier read.
Introducing the Intellectual Capital Index
One measurement I am excited about that recently launched is from Talent Growth Advisors is their Intellectual Capital Index (ICI). It’s part of the first-ever study to measure the specific dollar-figure contributions that talent makes to the market value of companies included in the Dow Jones Industrial Average (DJIA). Their analysis revealed that 86 percent of the average company’s value is a result of the active source of intellectual capital — its talent. Employees are directly responsible for more than $4 trillion dollars of the value for companies in the DJIA alone. Their statistics are research is incredible, but so far ICI is limited to the Dow Jones — those not currently listed on the stock exchange in the same boat they were before.
However, the data and research they are providing seems promising. Their top five companies listed on the ICI are:
- United Technologies
- United Health
It’s not surprising these businesses are on the list. My bigger question is: what is the method behind Talent Growth Advisors measurement? What are they measuring and how are they determining how talent makes a $4 trillion contribution? Is there a way to determine which departments, teams, employee types or leaders make the most impact? At present, TGA isn’t talking about it. I guess we need to buy their consulting services to really understand more about the method to their madness.
Even so I’m excited about the progress and the movement to help define how great talent can positively impact an organization especially those who are in supporting organizational roles.