What is Talentism?

CH finally did it. He goaded me into explaining what I mean by “Talentism.” (BTW – Love the new blog!) I have been struggling with getting a more detailed explanation down for a while so I might as well take a crack at it now.

First, someone told me recently that I often write like I am trying to make other people feel stupid. That is really not my intention. This is how I think about these things. Really smart people can take a difficult subject like this and make it easy to understand in one-sentence soundbytes. I am not nearly that smart.

Talentism means that talent is more valuable than money, which is more valuable than need. It’s better than capitalism, which values the holding and exchange of real capital (money), and it’s way better than consumerism (our present system of economics) in that it focuses on the production of value, not the fulfillment of need. It focuses people on how they can make the world a better place and it focuses companies on how they can help people achieve their best.

Remember, I defined talent here as “An ability to get the right job delivered to specification with the minimum acceptable amount of resources.” Or, put another way, talent = value, where value = stuff people buy because of need (not want). I know, I should say value = stuff people buy, period. But in a consumeristic society (where people buy stuff they don’t need with money they don’t have) I can’t stomach thinking about economics in terms of people buying Happy Meals. It’s not sustainable, it’s a bad allocation of resources and it appeals to 7 millions years of bad emotional programming that each of us lives with every day. Yes, there may be value in the temporary lift of emotion that comes from buying something, but it’s no different than saying that drugs have value because they help you escape. While true, we can't move the needle by everyone "tuning in and dropping out."

When we start valuing money more than the value creation which makes printing more money advisable, we kill the goose that lays the golden egg. Wall Street (which is the closest thing we have to an objective arbiter of value) has taken to using P&L statements and balance sheets as short-hands for value. But it doesn't work. Balance sheets don’t describe the value of the human beings within the operation, or the value of a company's system to capture, transfer and leverage knowledge. The P&L can’t capture the good faith of the customer, or the incipient bad will amongst angry customers just looking for a reason to dump you. As our economy moves more and more towards creating value through the creative application and development of knowledge, the balance sheet and P&L statement become less relevant about just how valuable a company really is.

Talentism says that if an executive has a choice between returning value to a shareholder in the form of immediate profits or in the form of increased intellectual capital, then they pick IC, assuming that the IC will provide more sustainable profits over time. Since all IC is created by people, talent is more valuable than money whenever there is a tradeoff between those two things.

Companies that identify what "value" is, reward people for producing it (rather than by title / grade), connect value to sustainable shareholder return, seek to expand the capability of their talent and account for the value of that talent in their Wall Street pronouncements and balance sheet will have higher stock prices and get better debt interest rates over the long-term than those that don't do those things. Which means it is in every company's best interest to work with the public sector (especially education) to create sustainable institutions that help individuals realize their inherent capability to produce value through the creative application and development of knowledge. We all know how to do it by the age of 5, but most of us get it beaten out of us by the age of 10. Companies need to get concerned about reversing that situation.

How will we know when Talentism is really working? Wide acceptance of compensation methods that reward value creation rather than seniority, title or grade, Wall Street demanding new ways to determine risk and value (including balance sheets which list the productive capacity of the talent connected to the enterprise), a Chief Talent Officer that controls all “talent” functions (including knowledge management, OD, advanced comp, strategy translation and resource allocation) and reports directly to the CEO, and executives getting rewarded by their boards and by the street for making well-reasoned long-term decisions that increase the value of the talent capital inside an organization even while it hurts short-term profits.

It may be too far a bridge to cross, but that is what I mean by Talentism.

Comments

[Colin Kingsbury]

Jeff,

I'm with you on the "talent more valuable than capital theme," though I'm not sure whether this represents a new truth, or if it's just that the ability of talent to mobilize capital efficiently is approaching or past some inflection point. Certainly you can view the classic battles of Thermopylae, or between Alexander and Darius, through the talent-versus-capital lens.

Digression aside, it would seem to me that in the end this is all going to show up in a company's Return on Invested Capital metric, no? The real challenge is that one can often reliably project a short-term benefit from Capital Plan A while the greater benefit from Talent Plan B needs to be discounted for uncertainty to the point that Plan A looks better. It seems to me that talentism coincides with an appetite for entrepreneurial risk-taking in many ways and this is anathema to most larger, well-established companies.

[Heather]

You forgot to mention that the person that you referred to here was kidding: "someone told me recently that I often write like I am trying to make other people feel stupid" and also mentioned that they (meaning *I*) had to read slowly to get it all to sink in. You are that smart and your writing style is dense with information. Hopefully you understand that there was teasing involved, even if yuo didn't mention that here. I have to be more careful about what I say to you!

[Jeff Hunter]

Colin - Either companies are in the business of buying and selling money (in which case they are banks) or they are in the business of returning above the cost of capital to investors. If the second, it is increasingly true that creativity and innovation are the only reliable path to achieving that objective (read: http://blog.360.yahoo.com/blog-aax.YEE5abPBZ0mZz0eiPw--?cq=1&p=40). So, counter intuitively, the only way to make more money in the knowledge game is to put money second to the talent that produces innovation, and the only way to consistently produce that innovation is to invest capital in talent. It doesn't matter how large or small you are. I agree that there is a disconnect between what the Street perceives to be value and what good business managers know to be true. But that will work itself out over time. At least I hope so.

Heather - I got that you were teasing, but I took it seriously, because I don't want to be a pompous ass (which, as you noted in a recent post, can be an occupational hazard). I thought your comment was a useful reminder to "keep it real." Thanks and keep ‘em coming!

[Martin Snyder]

Jeff I think your comment about the need to support education is the key takeaway. It's not only a critical element to a just and productive society; it’s also the one that seems to have the most potential for improvement.

Our national defense and healthcare are the only other areas of massive investment with similar imperatives, and they seem much less amenable to significantly better results with much less cost, while most of us think that the way we educate people throughout their lives is full of misapplied resources and outmoded methods, assumptions, and expectations.

One thing that I think needs consideration in planning is that numerically, today and into the future, there are still a massive number of needed jobs that don’t require significant innovation and creativity, although they may require learned skills and sweat.

Everything from mechanics, building trades, health technicians, foodservice and agricultural workers, truck drivers, chemical and industrial technicians, etc. What we need to do is to be able to build a sustainable society where those types of jobs can yield a reasonably high quality life; to have healthy families where the generations are not class bound in a calcified structure that only seeks to perpetuate itself.

I’m not talking socialist nonsense- I’m talking about investment and global rules of the game that don’t drive the cost of human life and labor to negative values.

And there will always be serious money to be made for those organizations that do a lot of raw work with marginally more controlled costs or outputs- innovation will be very valuable, as always, at the top, but it’s an iceberg.

Motivating, leading, organizing, and selling will also remain key drivers of wealth creation, especially in relatively static and maturing industries, and education of your own workforce may be a huge part of competitive advantage because the wider society may not be getting it done.

[Jeff Hunter]

Colin - I should have said "All businesses need to return above the cost of capital in order to return real value to shareholders, and they can either do that by buying and selling money or creating value through innnovation." I was on my way to participate in my children's school play and jumbled through the whole mess (I got to play an old man, which I am pretty sure is type-casting).

[Jeff Hunter]

Martin -

Great catch. Actually, when you boil it all down, my "Talentism" mission is a personal compulsion to try to remake the American education system. I am going to write a post about this soon, but very much appreciate your great comment.