Saturday 20 July 2002

The talent myth

I couldn’t help being reminded of the steady deterioration in corporate and political leadership over the last twenty years while reading The Talent Myth, Malcolm Gladwell’s latest New Yorker article:

This “talent mind-set” is the new orthodoxy of American management. It is the intellectual justification for why such a high premium is placed on degrees from first-tier business schools, and why the compensation packages for top executives have become so lavish. In the modern corporation, the system is considered only as strong as its stars, and, in the past few years, this message has been preached by consultants and management gurus all over the world. None, however, have spread the word quite so ardently as McKinsey, and, of all its clients, one firm took the talent mind-set closest to heart. It was a company where McKinsey conducted twenty separate projects, where McKinsey’s billings topped ten million dollars a year, where a McKinsey director regularly attended board meetings, and where the C.E.O. himself was a former McKinsey partner. The company, of course, was Enron.

The picture Gladwell paints of Enron is of a company that scrupulously followed McKinsey’s recommendations, grading employees into A, B, and C groups: “The A’s must be challenged and disproportionately rewarded. The B’s need to be encouraged and affirmed. The C’s need to shape up or be shipped out.” The A’s were then allowed to do pretty much whatever they liked. At Enron, Gladwell writes, ” the needs of the customers and the shareholders were secondary to the needs of its stars.”

The broader failing of McKinsey and its acolytes at Enron is their assumption that an organization’s intelligence is simply a function of the intelligence of its employees. They believe in stars, because they don’t believe in systems. In a way, that’s understandable, because our lives are so obviously enriched by individual brilliance. Groups don’t write great novels, and a committee didn’t come up with the theory of relativity. But companies work by different rules. They don’t just create; they execute and compete and coördinate the efforts of many different people, and the organizations that are most successful at that task are the ones where the system is the star.

One organization, above all others, believes that the system is the star: the military. And to illustrate his theory of why Enron’s exclusive focus on talent resulted in catastrophe, Gladwell focuses on the inability of the US Navy in World War II to successfully counter the German U-boat threat, a problem that was eventually solved by introducing a different kind of organization to harness the efforts of the same talented individuals who had previously failed.

Then, as examples of companies whose values (and ongoing success) are diametrically opposed to Enron’s, Gladwell points to Southwest Airlines, Wal-Mart, and Procter & Gamble, each owing its success to highly effective operational systems, two having CEOs with military backgrounds.

Although Gladwell’s focus is on systems, his article makes it quite clear that Enron was a company without any real leadership. He also suggests, obliquely, that in a society of individuals with a culture that glorifies talent and worships stars, there are real insights to be gleaned from organizations like the army and navy, which place the highest value on systems, teamwork, and effective leadership.

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Sigh. Groups *do* write great novels. They just don't do it as formally constituted groups. They do it as individuals paying attention to other individuals and their work.

There is danger in over-systematization as much as in overreliance on stars. If there's a happy medium, I haven't seen it tried yet.

Posted by Dorothea Salo on 20 July 2002 (Comment Permalink)

Wow, having served in Vietnam as part of a "dysfunctional system," I might want to hedge my bet on this.

While I'd agree that a "star" system has its disadvantages, Microsoft seems to do pretty well with Gates at the helm. Of course, he relies on a system that operates an awful lot like a college campus where everyone is required to be part of the team.

The military is far too top-down for my taste, seldom allowing serious input from anyone below a lieutenant. I prefer a far less rigid system where everyone at the company feels enabled to help make decisions.

Posted by Loren on 20 July 2002 (Comment Permalink)

I agree with the others. The mistake is to think that a system has to be rigid, heirarchical and imposed. Most systems that work are based on small units, simple rules and trust - and this includes the military. I remember hearing that the US Marines had a motto along the lines of "Keep moving, stay in touch and head for the high ground". Seemes like pretty good advice whatever you do!

Posted by The Obvious? on 20 July 2002 (Comment Permalink)

Dorothea is right; Einstein wudl not have come up with Relativity without reading the work on Newton, Planck and others; most scientific theories are colloborations or simultaneous discoveries; it is the storytellers afterwards who seek the 'lone genius against the world' story.

Many novels are collaborations, and almost all music and comedy are.

Posted by Kevin Marks on 22 July 2002 (Comment Permalink)

I am always a litte annoyed at offhand comments on military culture by only casually interested observers. How exactly does a Panzer commander look? Does watching Apocalypse now qualify to judege the value of a war as a life experience?
I strongly recommend a more serious commitment to undertanding military value, culture and history, before attempting low value profundities.

Posted by Don Zacherl on 25 July 2002 (Comment Permalink)

As for me, I'd take couple of words from Aristotle. "Ideal is the middle between two extremes."

As how to put it, either on reliance on stars and systematization, how much on either, it depends on the context. You cant get a detailed system that can work in all situation.

Just my 2 cents

Posted by Fadzlan on 31 May 2003 (Comment Permalink)

The interesting omission to the commentary is the brute raw arrogance of the graduates that McKinsey hires. I have just finished a stint in with a group of McKinsey and BCG alumnus and I will never work with this type again if I have my way. Talk about a group of arrogant alleged strategy consultants who know nothing of real business strategy or operations. The group of 30 were mostly rejects after year two (not worthy of promotion) dismissals from their firms. Now the rest of corporate USA is stuck with overpaid, underachieving, arrogant, and relatively useless talent (myth of course).
Ivy or McKinsey, they are all scum no matter how you spin it!

Posted by Rogue McKinsey on 10 July 2003 (Comment Permalink)

This discussion is now closed. My thanks to everyone who contributed.

© Copyright 2007 Jonathon Delacour